ITEM 6-K
FD:CMD:br:f:\finance\admin\stfrpts\srgann
Council Meeting: November 7, 1995 Santa Monica, California
TO: Mayor and City Council
FROM: City Staff
SUBJECT: PREPARATION OF MARCH 1996 BALLOT MEASURES TO RENEW
EXISTING GANN OVERRIDES
INTRODUCTION
This is to recommend that the City Council direct the City Attorney
to prepare ballot measures to renew the City's existing City
Services and TORCA Gann overrides for an additional four years, and
submit the ballot measures for City Council approval at its meeting
of November 14, 1995 in order that they may be submitted to Los
Angeles County for printing on the March 1996 primary ballot.
BACKGROUND
In 1979, State voters approved a change to the State Constitution
establishing a spending limit on the amount of tax revenue
governments can receive and use in any fiscal year. This
restriction is known as the Gann Limit. Each jurisdiction's annual
Gann Limit is equal to actual tax revenues spent in the base year
of FY1978/79 increased each year by standard population and
economic growth factors. This is the jurisdiction's "on-going"
limit. In addition, local voters can approve limit overrides for a
four-year period to enable a jurisdiction to spend tax proceeds
resulting from local population and/or economic growth which is
greater than the standard growth factors, or to accommodate the
receipt of additional tax revenues used to provide necessary local
services. In Santa Monica, the City Services override has been
approved by approximately two-thirds of the local voters on four
separate occasions since 1981, and the TORCA override three times
since 1984. They were both last approved in 1992.
For the City of Santa Monica, major sources of tax revenues are the
Utility User's Tax, Sales Tax, Property Tax, Business License Tax,
and the Transient Occupancy Tax.
ANALYSIS
The City currently has two Gann Limit overrides which will expire
in June 1996 and which total approximately $37.9 million for
FY1995/96:
-- City Services Override - $27.6 million for maintaining and
providing increased police services, aid to the public
schools, maintaining basic City services, and for other
specified purposes such as capital improvements for parks,
street lighting, libraries and police facilities;
-- TORCA Override - $10.3 million for the Tenant Ownership
Rights Charter Amendment (TORCA) program for the provision
and improvement of housing for low and moderate income
households.
Excerpts from the City Charter which show the wording of existing
Gann Limit overrides are attached.
If the City Services override is not renewed for another four
years, the FY1996/97 Police Department operating budget would have
to be reduced by up to $9.1 million or about 27% (representing the
amount of Police Department budget increase since FY1981-82 which
is applicable to this Gann override), and all other General Fund
operations such as aid to the Santa Monica-Malibu Unified School
District, Parks and Recreation, Library, Engineering, capital
improvement, equipment and administrative support services would
have to be reduced up to $18.5 million or about 23%. If the TORCA
override is not renewed, new TORCA program applications could not
be accepted after June 1, 1996.
PROJECTION OF TOTAL CITY GANN LIMIT AND TAX REVENUES: FY1996/97 -
FY1999/00
The following table shows projections of the City's on-going Gann
Limit, the City Services override and future tax revenues through
FY1999-00. The table indicates that if the City Services override
is renewed in March, 1996 at $25.3 million, the City would not
exceed its Gann Limit through FY1999-00.
Projection of
Total City Gann Limit and Tax Revenues
(in millions)
City Gann Limit Components 96/97 97/98 98/99 99/00
- On-going Gann Limit $ 60.7 $ 62.4 $ 64.2 $ 66.3
- City Services Override 25.3 26.0 26.7 27.6
_____ _____ _____ _____
Total City Gann Limit $ 86.0 $ 88.4 $ 90.9 $ 93.9
Projected Tax Revenues $ 85.8 $ 88.2 $ 90.6 $ 93.6
_____ _____ _____ _____
Net-under/(over) $ .2 $ .2 $ .3 $ .3
The TORCA override is not considered in the above analysis as TORCA
tax revenues can only be used for TORCA specified purposes and
therefore do not impact general City operations. Further, due to
the unpredictability of the receipt of TORCA tax revenues and the
rate of spending of previously received tax proceeds, the TORCA
override specifies that the amount of the override, each year,
equals the amount of new tax proceeds actually received plus the
amount of previously unspent tax proceeds.
IMPACT OF NOT RENEWING CITY SERVICES AND TORCA OVERRIDES
As the following table shows, if the City Services override is not
renewed, the City will exceed its FY1996-97 on-going Gann Limit
component by $25.1 million, and will not be able to continue
existing City services financed by $104.6 million of tax revenues
over the next four fiscal years which are generated by existing
taxes and tax rates.
Projection of Impact from Not Renewing City Services Override
96/97 97/98 98/99 99/00
On-going Gann Limit $ 60.7 $ 62.4 $ 64.2 $ 66.3
Projection of Tax Revenues 85.8 88.2 90.6 93.6
_____ _____ _____ _____
Net-under/(over) $(25.1) $(25.8) $(26.4) $(27.3)
It is advisable for the TORCA Program Gann Limit Override to be
renewed by the voters to eliminate any question that all future
Tenant-Participating Conversion Tax revenues generated by existing
liens will be available for the provision and improvement of
additional housing for low and moderate income households.
SUMMARY
It is essential for the City to be able to continue to receive over
the next four fiscal years all tax revenues which will be generated
by existing taxes and tax rates. These revenues are needed in
order to maintain the high quality of City services which the
community now enjoys.
RECOMMENDATION
It is recommended that the City Attorney be directed to prepare
appropriate March 1996 ballot measures, as specified above, to
renew the City's City Services and TORCA Gann Limit overrides for
the four-year period June 1996 through June 2000, and to return the
proposed ballot measures to the City Council for approval at its
meeting of November 14, 1995.
Prepared By: Mike Dennis, Director of Finance